Small building societies' good mortgage deals

The towns of Mansfield, Marsden and Market Harborough aren't places everyone can instantly place on the map. But building societies from each of these three towns have suddenly started popping up alongside the likes of Abbey, NatWest and HSBC in mortgage best-buy tables.

Mortgage deals: Good things come in small packages?

The three minnows offer two-year fixes from 3.39%, trackers from 3.29% and discount deals from just 2.99% respectively.

In recent weeks Hanley Economic in Stoke-on-Trent and Principality in Wales have also been in the best-buy charts with two-year discounts from 3.14% and two-year fixes from 2.99% respectively. But is it safe to trust a mortgage minnow?

A host of little-known, local lenders have certainly hit troubles this year. The Dunfermline came close to collapse at the end of March, and last week the Bank of England continued to hold talks over funding levels with seven larger societies, including Chelsea, Yorkshire and Coventry.

But while experts predict that several more small societies may merge or be taken over before the recession ends, they say it will be business as usual for mortgage customers. Sadly, you cannot hope that if your lender goes bust your mortgage will disappear with it.

If you are on a fix or tracker, for example, then your payments or mortgage terms won't change if your lender is taken over by a larger rival, and you will be free to remortgage in the normal way when your existing deal expires.

Experts say the real problem with small lenders is finding out about their best rates in the first place, and then being accepted if you do. Most offer their best-buy deals for only a matter of weeks.

Spotting the deals can be hard. Many societies don't deal with intermediaries so their rates aren't on brokers' websites. Neither can you get a broker to apply for you. For example, Hanley Economic's recent discount deal was open only to personal applications in branches or by phone.

Other small players limit access in other ways. Chesham and Newbury building societies have lists of acceptable local postcodes (they can be found on their websites). And Edinburgh-based Scottish building society, which has special schemes for people buying guesthouses and loans for doctors and dentists buying premises, might consider applications for properties in the northern counties of England, but you really need to be buying in Scotland to qualify.